True-Up Match for Prior year and Safe Harbor

[PMC]

Plan has been making a matching contribution on a periodic basis throughout the plan year (5-1 to 4-30). The matching formula is 50% of deferrals not to exceed 3% of participant's compensation. Compensation is "plan year" compensation.

Two HCEEs hit their deferral limit mid year. Corresponding match therefore stopped. Although the plan document does not specifically address true-up (either yes or no) upon reviewing the plan language the sponsor is interpreting the plan so that it requires using the full plan year compensation in determing the match. The Sponsor wants to retroactively apply the true-up for the 2006 plan year (and all subsequent plan years).

Do you see a problem with applying it for the 2006 plan year if the sponsor determines they were not interpreting the plan provision properly and the additional match should have been made?

Any additional true-up match would be made to all affected participants (NHCEEs and/or HCEEs). It would be counted for 415 purposes for the 2007 plan year so have to make sure no 415 excesses.

Another factor is this is a safe harbor plan (using the 3% nonelective to satisfy ADP) and this Match in question satisfies ACP safe harbor. If the additional true-up match can be made for the 2006 plan year, could it be made only to the extent when added to the 2007 total match satisfies the ACP safe harbor limits (no match of deferrals in excess of 6% of comp.) for 2007? Want to remain within the confines of ACP safe harbor and not have to test any match. Thanks.

[QDROphile]

You have to proceed under the premise that the plan failed to comply with its terms in failing to calculate the match based on compensation for the year. Correct accordingly under EPCRS.